TORONTO, Feb 23 (Reuters) - Royal Bank of Canada on Friday said concerns about the outcome of talks to renegotiate the North American Free Trade Agreement were impacting longer-term investment decisions by its commercial customers.

Officials from the United States, Canada and Mexico are preparing for a critical seventh round of negotiations in Mexico City beginning on Sunday, amid growing doubts a deal will be agreed before talks are scheduled to finish in early April.

"Some of our commercial customers remain concerned about it and it's certainly impacting longer-term investment decisions that we see customers making," RBC Chief Executive Dave McKay said on a conference call after the bank reported first-quarter earnings that exceeded market expectations.

McKay was hopeful a deal would be reached but believed there was a "reasonable probability" that U.S. President Donald Trump would trigger a 180-day countdown to withdraw from the agreement.

"At that point I still think the markets will largely anticipate a good outcome and look through that but you'll see some volatility through this process," he said. "We all hope this gets resolved in the near-term."

Canada's biggest lender by market value reported earnings per share, excluding one-off items, of C$2.05 for the quarter through Jan. 31. Analysts had on average forecast earnings of C$1.99 per share, Thomson Reuters I/B/E/S data showed.

RBC reported net income of C$3 billion ($2.4 billion), up 7 percent from a year earlier. That included a writedown of C$178 million as a result of a tax overhaul in the United States.

The bank's core personal and commercial banking division produced a 10 percent rise in net income to C$1.5 billion, benefiting from a 6 percent increase in sales of residential mortgages despite concerns over Canada's housing markets.

Canadian authorities have taken a number of steps over the past 18 months to cool overheating housing markets in Vancouver and Toronto, including imposing taxes on foreign buyers. The country's banking regulator in January introduced stricter rules on mortgage lending.

RBC said net income at its wealth management business jumped 39 percent to C$597 billion, benefiting in part from the U.S. tax changes. Net income at its capital markets business rose 13 percent to C$748 million, also benefiting from the U.S. tax changes.

The bank reported an increase of 3 cents in its quarterly dividend to C$0.94 and said it planned to buy back more shares.